The consensus estimate for year-over-year CPI was unchanged. I accurately called for a 0.1 percent drop but was high by 0.1 percent month-over-month.
The BLS reports the CPI Rose 0.2 Percent in July.
CPI Month-Over-Month Details
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis, after declining 0.1 percent in June.
- The index for shelter rose 0.4 percent in July, accounting for nearly 90 percent of the monthly increase in the all items index.
- The energy index was unchanged over the month, after declining in the two preceding months.
- The index for food increased 0.2 percent in July, as it did in June. The food away from home index rose 0.2 percent over the month, and the food at home index increased 0.1 percent.
- The index for all items less food and energy rose 0.2 percent in July, after rising 0.1 percent the preceding month.
- Indexes which increased in July include shelter, motor vehicle insurance, household furnishings and operations, education, recreation, and personal care.
- The indexes for used cars and trucks, medical care, airline fares, and apparel were among those that decreased over the month.
CPI Month-Over-Month Rent and OER
Shelter Was Hot
The largest component in the CPI is Owners’ Equivalent Rent (OER) with a weight of 26.76 percent. OER is the price homeowners would pay to rent their own home if the rented instead of owned.
Rent of Primary Residence is another 7.64 percent, and the broader Shelter category is a huge 36.32 percent of the CPI.
I estimated 0.1 percent month-over-month because I expected better shelter readings than we got.
The price of rent and OER each rose at least 0.4 percent every month for 33 consecutive months, breaking the string last month with a rise of 0.3 percent for both.
I was surprised to see rent back at 0.5 percent and would have gotten the 0.1 percent decline I expected had that not happened.
This is not good news.
Good News on the Medical Front
Medical care services, with a weight of 6.51 percent, declined 0.3 percent in July.
Medical care commodities, with a weight of 1.48 percent, rose 0.2 percent.
Those taking expensive prescriptions may have been hit much harder, while those on Medicare may not notice a thing.
CPI Month-Over-Month Energy and Gasoline
The price of energy and the price of gasoline were both unchanged from a month ago.
Gasoline accounts for 3.50 percentage points of the 6.92 weight given to energy in the CPI.
Electricity accounts for another 2.50 percentage points of the broader index. Based of gasoline prices, I figured the energy index would likely be flat this month.
CPI Month-Over-Month Food
Food was up 0.2 percent for the month, with food at home up only 0.1 percent.
There is a lot of disagreement over food. But if you know how to shop and have a big freezer, you can do much better than the CPI reports just by buying what’s on sale and freezing it or storing it in the pantry.
If you don’t have a freezer, insist on organic, etc., you will likely do worse or perhaps much worse than the BLS suggests.
CPI Year-Over-Year Percent Change
Year-Over-Year Details
- CPI: 2.9 Percent
- OER: 5.3 Percent
- Rent: 5.1 Percent
- Core CPI (excluding food and energy): 3.2 Percent
- Food and Beverage: 2.2 Percent
My Forecast
I have not done this before, in detail, but yesterday I commented Expect Good to Very Good CPI Reports for July, August, and September.
Year-Over-Year Look Ahead
- July: 2.9 percent
- August: 2.4 percent
- September: 2.1 percent
At the risk of looking silly, I suggest any surprises for those numbers to be to the downside.
Had shelter come in better for July, we would have seen July at 2.8 percent.
But if shelter is up another 0.4 percent in August, then I will be on the low side for August.
For each 0.1 percentage point difference in August vs the above estimate, my forecast for September will change correspondingly.
I may revise my estimates closer to next month’s report. For now, I will stick with those estimates.
BLS Lies, Manipulation, BS?
The CPI is a very personal thing, leading to charges of BLS manipulation or outright lies.
Those stuck renting and seeking to buy their first home, those who pay their own health insurance, and those in flood or fire zone with soaring insurance costs will all think the overall numbers are somewhere between BS and lies.
Those who own their own home, and don’t live in a high insurance area, and are healthy or are on Medicare will have lower than the reported rises in the CPI.
I am in that fortunate class. It’s BLS averaging that makes it look like lies to many people.
That said, I believe the inflation is understated because the BLS does not properly account for home prices, not because of purposeful manipulation.
Inflation Matters
Inflation matters, not just consumer inflation.
The BLS and the Fed totally miss the boat because home prices are not in the CPI and both act like rising home prices don’t matter.
The Fed has made many huge mistakes by not accounting for home price inflation. Its QE and inability to think clearly created the housing mess we are in.
Storm Brewing
Meanwhile a major storm is brewing. Please note Credit Card and Auto Loan Delinquencies Surge in the Second Quarter
Over ten percent of credit card outstanding debt is over 90 days delinquent. Banks will be curtailing credit.
Recession Debate
On August 9, I discussed why things are worse than they look.
If you missed it, please see Recession Debate: Citing the Sahm Rule, WSJ’s Greg Ip Says No Recession
Expect all government generated data to suggest a rosy economy as the election draws near. After the election the downward revisions will occur.
Final point I want to make regarding the CPI & COLA.
Remember those ‘huge raises’ the UPS drivers got? The ones that didn’t even keep up with inflation?
Well, they just got their first yearly COLA on August 1st. Z-E-R-O.
The YoY CPI inflation was 3.2% yielding a COLA of 4 cents per hour, but it isn’t payable since it’s not at least 5 cents, so they get nothing. So much for those great union COLAs.
“Effective August 1, 2024 and every August 1, thereafter during the life
of the Agreement, a cost-of-living allowance will be calculated on the
basis of the difference between the Index for May 2024 (published
June 2024) and every May thereafter, and the base Index for May
2023 (published June 2023) and every May thereafter, as follows:
For every two tenths (0.2) point increase in the Index, over and
above the base (prior year’s) Index plus three percent (3.00%) there
will be a one (1) cent increase in the hourly wage rates payable on
August 1, 2024 and every August 1 thereafter. These increases shall
only be payable if they equal five cents ($.05) in a year.”
CPI-W May 2023: 298.382
CPI-W May 2024: 308.163
(308.163-(298.382*1.03))/0.2= 4 cents
The wage increase this year for UPS workers was 75 cents an hour (regardless of pay level). Since there was no COLA, that means that any UPS worker making more than $23 an hour did not keep up with the supposed 3.2% inflation.
No, CPI is not a personal thing. It is universal, because what we are actually talking about is the debasement of the value of the dollar.
So let’s get down to basics. What causes inflation? Inflation is created by money production in excess of the production of goods and services.
Some inflation comes from consumer debt, but the lions share comes from Government debt.
Government debt is particularly inflationary because a great deal of Government spending is either stolen through graft and corruption, or simply wasted. Government also tends to spend a stupid amount of money on the military and war for which there is no return whatsoever. Building a billion dollar Patriot System to send to Ukraine and have it blown up is just wasted money that adds no tangible value to the economy.
So what you have is an ever increasing supply of money being pumped into the economy, without corresponding goods and services to be purchased with that money.
So ask yourself.. Is the Government spending / wasting more or less money this month than it did last month? How about last quarter? How about last year? The answer is that Government deficit spending is not just increasing, the rate of spending is accelerating, mostly because it is flushing trillions of dollars down the toilet on wars and military spending including keeping more than 100 military bases going worldwide.
At the same time this unbelievably massive acceleration in spending is happening, business nationwide is declining with companies going out of business, stores closing, and layoffs accelerating. Now someone please explain how you can have inflation decreasing when you are pumping increasingly more money into an economy that is stagnating?
The answer is that you can’t, and anyone who tries to tell you different is lying to you. Think for yourself, and stop believing what anyone in media tells you.
I was going to wait for Mish to make a post about ‘personal’ CPI, but I’ll say this: the concept of a ‘personal’ CPI is just a defense mechanism to cope with the fact you’re being robbed by the Fed and the Treasury, just ‘not as much as everyone else’.
Sure you can buy food in bulk and scrimp and scrounge, but chances are you were doing that 5 years ago when everything was 25% cheaper. The purchasing power of the dollar is still down 25% no matter how you try to spin it.
So what do regular people who work the cashiers line think about all this?
Was at a big box store to get a few items this morning. Gave the Lady at the checkout a C note. After counting out the change as she hands it to me, she asks, did you kiss it goodbye? Was a bit slow off the starter block, as she followed up with once it gets broken its gone. I then said yeh it goes out like water.
Then stopped at a Costco, peoples shopping carts were not loaded as they were in the past and employees as at the big box, all had grey or white hair who worked the checkout.
Trump was charged with taking away peoples Social Security, looks like Biden-Harris have done a number on elderly peoples ability to retire. Many have to go back to work just to make ends meet.
I hadn’t thought about the grocery thing until you said it, but my experience has been the same. I went to the regular grocery store last night, and most people were just getting one to three items, even though the parking lot was packed. I went to Costco today at 2PM in Orange County, and same thing. I breezed through self checkout, with about 1/3 of the stations unoccupied, and most people just getting a half cart or less worth of items.
Oh, the woes of Fed f*(kery. Near two decades of subsidized interest rates and transferring wealth, and they seriously think they can fix gross mismanagement with some minor meddling.
I suspect home rents will keep climbing, to counter asset mania elsewhere. Renting is also the substitute for unaffordable housing, which suggests rental properties are under-priced???
Ultimately, the blame goes to every president who enabled deficit spending, and the Fed for voiding the essential principle of rationality underlying opportunity costs.
The Fed transferred wealth from people’s bank account to poor people and small business owners, piling debt. Since the sticky CPI is down we are not likely to be in recession. If it’s doing an A-B-C up gov debt might deflate. If the gov is fully committed to cutting debt, the nominal debt might deflate by 25%/35%. The ration : Price/Rent will deflate, bc mortgage rates will stay up, or rise !
Kamala Harris vp blames Trump for freezing the US during covid and printing a tsunami of money. The sticky CPI, less food and energy, rose from 1.4% in 2021 to 6.5% in Dec 2022, before dropping to 4.16% in July 2024. The sticky CPI, ex food & energy, cont to rise during recessions like a gecko on a wall or a spider on a silk cord. When it’s over the sticky loses its grip.
Can the sticky CPI make an A-B-C up until 2028 ?
In the early days, when it was evident from the sulfur clouds over Wuhan, and China’s hard line policies like welding people inside their apartment buildings, Trump wanted to close the borders. The ‘wise’ Dems screamed no. Funny how everyone has forgotten that.
It’s an election year. To please the elderly COLA might be higher than 3%<3M baked by the fake OER. If 1M QQQ Aug closes above July close COLA will be high. If QQQ Aug close below July low and prick 2021 high on Sept 17 Mish might be right.
Core rate +3.2% does not justify a rate cut.
I figure if CPI is 2.9% (or whatever) and real growth is about 2%, the 90-dayT should be running about 4.9%. However, I suspect CPI is higher, and real growth is lower, given real consumer sales. The only problem is Wall Street gets rich on 1-2%–which justifies today’s high stock prices.
With Wall_Street rates, risk is irrelevant.
Supercore services inflation is at 4.73% yoy, the figure that Powell previously emphasized as the one to watch. So 2.365x above target, and the Fed is really going to cut? Really? Consumer Goods prices overshot due to a flood of money, so if they fall a percent or two after rising 20%, I call that a return to trend — in fact, well above trend.
The great and wise Kamala Harris is already lowering inflation for our comrades! All the non believers must be silenced! Or something like that in the MSM.
Inflation is always and ever a monetary phenomenon. Foreign governments are cashing in worthless USTreasuries because what can’t be paid won’t be paid. Dollars flood the market. Inflation results. The Department of Commerce economic reports under Joe Jill and Hunter Biden have less integrity than Kamala Harris.
Concur with the angst. The QT US short term/long term sovereign debt inversion is now about 30 days longer than that QT inversion leading to the 1929 peak equity valuation. This is week 31 of 32-33 of an October 2023 13/32-33 week first and second fractal series synchronized with a longer 1982 13/31 of 32 year first and second fractal series. A lot of bad debt and asset overvaluation with respect to real consumer wages will rapidly (much faster than 1929 to 1932) undergo recalibration. At the margins, a 0.5% monthly increase in rent can be the final straw that nonlinearly breaks the camel’s back.
The terminal 32-33 week timing should be an interesting background for the national dem convention next week.
Could you write that in everyday English?
I stopped at fractal. It’s like we need a nice little formula to explain complex behavior, and a more complex financial/economic system
The unreported story is the CPI-W 1984 index has declined 3 times in the past year. In the last 3 months it has barely budged; increasing at an annualized rate of less than 1%.
How goes the 2025 SS COLA? The July 2024 index stands at 308.501. Still waiting on the Aug & Sep figures. The average of the Jul/Aug/Sep 2023 figures is 301.236. So far the 2025 COLA stands at 2.4%.
Don’t get too excited about that huge 2.4% COLA, because it’s entirely possible the BLS reports deflation in the next month or two.
Correction: the CPI-W 1984 has actually declined 4 times in the last year. The reason the public isn’t aware is because the MSM doesn’t report it.
Unfortunately, the CPI is understated (probably on purpose) and is not based on a realistic basket of goods that the average American spends. It will reduce the increase the annual raise in social security recipients, many of whom rely on this source of income for their living expenses.
At least, these bogus numbers will keep the stock market rallying and will be used as a further excuse for the fed to cut interest rates.
Yes and no, but mainly the latter.
You are essentially wrong and I will explain why in a second post although I thought I explained it in this one.